Mortgage rates have risen since the start of 2018, and that has reduced the benefits of a mortgage refinance for some homeowners. But there are still plenty of homeowners across Washington State who could potentially save money by refinancing their existing mortgage into a new one.
Some Homeowners in Washington Could Still Refinance
When mortgage rates rise, there’s a perception that it no longer makes sense to refinance. But the “making sense” part can actually vary from one homeowner to the next. The financial benefits of refinancing can depend on several factors. The homeowner’s current mortgage rate, the rate assigned to the new loan, and the length of time you plan to say in the home all play a role.
According to a recent report published by the analytics firm Black Knight, nearly 1.9 million homeowners across the U.S. still “have an interest rate incentive to refinance” their existing mortgage loans. That’s a decline of 56% from the state of 2018, when interest rates were lower. But it’s still a sizable group of borrowers who could benefit from refinancing their homes.
While some homeowners in Washington and nationwide still have an incentive to refinance, the “window” of benefits has closed for others. The Black Knight report showed that an estimated 6.5 million homeowners across the country have now “missed their opportunity to refinance their mortgages due to rising rates.”
Many people with an existing home loan don’t realize what position they are in, as far as interest rates and refinancing go. Or maybe they don’t think about it at all. This is why so many homeowners have missed the opportunity to reduce their overall housing costs with a refinance loan.
An Updated Look at Mortgage Rate Trends
At the start of 2018, the average rate for a 30-year fixed mortgage loan was just under 4%. That’s based on the weekly industry survey conducted by Freddie Mac. Thirty-year mortgage rates rose steadily through the first part of this year, fluctuated for a period of time, and then leveled off in the 4.8% range through the fall.
That’s where we are now, as of early November 2018. Looking forward, some economists and analysts have predicted that rates will be slightly higher in 2019 than they are now. But there’s no way of knowing for sure. A lot could change between now and then.
If rates do continue to inch upward, there will probably be fewer homeowners across Washington State and nationwide who could benefit from refinancing. On the other hand, if they hold steady it could “buy time” for those homeowners who are still in a good position to refinance.
Refinancing usually works best as a long-term strategy. There are typically closing costs involved, just as there are with a purchase loan. So the idea is to save more money over the long term than what you pay in processing / closing fees. The point at which this occurs is known as the break-even point.